Kodak cuts 15,000 jobs & buys Chinon

Kodak has today said it would cut as many as 15,000 jobs and take charges
of up to $1.7 billion over the next three years as it works through a
painful shift toward digital products and away from the waning film market.
Kodak has shed some 22,000 jobs in the last five years, cutting its work
force to about 64,000 in 2003 from 86,000 in 1998. Another story from
Kodak today is that that are buying the remaining 41% of Chinon Industries
to take full control. Chinon Industries, established in 1948, is engaged
in research, development, and manufacturing of digital cameras.

Press Release:

Kodak to cut up to 15,000 jobs, stock rises

NEW YORK (Reuters) - Eastman Kodak Co. Thursday said it would cut as
many as 15,000 jobs and take charges of up to $1.7 billion over the next
three years as it works through a painful shift toward digital products
and away from the waning film market.

The photography company, whose shares soared to their highest level in
seven months in early trading, also announced an 83 percent decline in
fourth-quarter net income. However, excluding one-time charges, the profit
beat Wall Street views.

"Previous administrations have had problems with carrying out plans,
but this is the first time that there is a level of seriousness that merits
attention," said Chris Carosa, whose firm advises the Bullfinch Western
New York Series Fund.

However, after an investors meeting in New York, some analysts were more
guarded. With Kodak set to write off so many costs -- including up to
$400 million this year -- before its transformation ends in 2006, they
say it will be hard to accurately judge Kodak's performance.

During the meeting, Kodak's executives voiced optimism about digital
markets such as medical imaging, production printing imaging and high-end
cameras, but spelled out few specific products it plans to introduce,
or which of its many tough rivals it will target to gain market share.

"This is a 3-year plan that is not well detailed," said analyst
Shannon Cross of Cross Research. "It makes you wonder what's going
on with the fundamental company from an earnings standpoint. It's hard
to track."

On Thursday, the Rochester, New York-based Kodak said it would cut 12,000
to 15,000 jobs worldwide, or about 20 percent of its work force, including
2,500 to 3,500 this year. It expects related savings of $800 million to
$1 billion by 2007.

Investors welcomed the news. Kodak shares rose to $31.07, up $3.61, or
13 percent, in active afternoon trade on the New York Stock Exchange,
where it was the highest percentage gainer among blue chips. Earlier in
the session they jumped as much as 14 percent to their highest level since
June 17.

SHRINKING THE COMPANY A PRIORITY

Kodak has shed some 22,000 jobs in the last five years, cutting its work
force to about 64,000 in 2003 from 86,000 in 1998. The cuts will be offset
somewhat by new employees that join the company via acquisition.

Shrinking its structure is seen as key to creating a more profitable
operation focused on high-growth products. But Kodak must make changes
even as film sales, its chief revenue source, slip.

On Thursday, Kodak said global industry sales of consumer film fell about
8 percent in 2003, and could fall 7 percent to 9 percent in 2004. Moreover,
the price of silver, which is used to make traditional film, remain high,
forcing Kodak to spend more on materials.

For the fourth quarter of 2003, Kodak posted net income of $19 million,
or 7 cents a share, down sharply from $113 million, or 39 cents a share,
a year earlier.

Excluding one-time items, Kodak earned $199 million, or 70 cents a share.
Analysts on average had expected 52 cents a share, according to Reuters
Research, a unit of Reuters Group PLC.

Sales totaled $3.78 billion, up 10 percent from $3.44 billion a year
earlier. Excluding the positive effect of the weak dollar, which boosts
the value of overseas sales when they are converted into dollars, sales
increased 4 percent.

Kodak reported revenue growth in many of its digital units, including
digital cameras and online photofinishing.

While film still provides ample revenue for Kodak, its traditional consumer
film business has eroded under competition from rivals such as Japan's
Fuji Photo Film Co Ltd. and, more recently, from digital photography.

Eastman Kodak Company (Kodak) today said that it will launch a tender
offer, through its Japanese subsidiary, to purchase all the common shares
of Chinon Industries, Inc. that Kodak's subsidiary doesn't already own.
The move will help Kodak increase its worldwide design and manufacturing
capability for consumer digital cameras and accessories, another advance
in the digitally oriented growth strategy that Kodak announced in September.
If successful, the total cost to Kodak will be roughly $35M for Chinon's
outstanding equity and associated costs.

Chinon Industries, established in 1948, is engaged in research, development,
and manufacturing of digital cameras. Kodak is Chinon's largest customer,
accounting for nearly 100 percent of Chinon's revenue for its fiscal year
ending March 31, 2003, which was Y29,892M or about $280M at current exchange
rates. The tender offer is expected to be followed by a complete privatization
of Chinon Industries pursuant to the Industrial Revitalization law under
the Japan Commercial Code.

Upon completion of the tender offer and privatization process, which
is being conducted through the company's Japanese subsidiary, Kodak will
merge its Digital Camera Research and Development center in Yokohama,
Japan, with Chinon to form a unified Kodak Digital Product Development
Center. The center will allow Kodak to improve its overall operating and
manufacturing efficiency related to consumer digital cameras.

"As consumer demand increases for digital cameras, building a nimble,
smart organization that can meet market needs makes good business sense
and helps drive our growth strategy," said Bernard Masson, President,
Digital & Film Imaging Systems, and a Senior Vice President, Eastman
Kodak Company. "The purchase of the remainder of Chinon enables Kodak
to develop one organization in Japan that is stronger, more efficient
and more effective than what we currently have. In turn, we expect to
use this strength to build our presence in the world's second-largest
market for consumer digital cameras."

Kodak intends to purchase, through its indirect subsidiary, the remaining
41 percent (9,306,161 shares) of the outstanding common shares of Chinon
not currently held by its subsidiary. Kodak said the offer is being made
with the full agreement and support of the Chinon board of directors,
which passed a resolution of support for the tender.

The tender offer process is scheduled to begin on January 23, 2004, and
will continue for a period of 24 working days, closing on February 26,
2004. Kodak will offer to buy all remaining outstanding common shares
of Chinon at a price of 350 yen per share. Based on the closing price
on January 20, 2004, this price represents a 25 percent premium to the
average closing price of the previous three months and a 37 percent premium
over the average closing price of the last month. Kodak, which currently
owns, through its subsidiary, 59 percent of Chinon, expects to announce
the results of the tender offer by the end of February.

Kodak concurrently announced that its Japanese subsidiary has been granted
approval by the Japanese Ministry of Economy, Trade and Industry pursuant
to the Law on Special Measures for Industrial Revitalization (LSMIR) under
the Japan Commercial Code in order to complete the conversion of Chinon
to a wholly owned subsidiary. It is therefore expected that all shareholders
who continue to hold shares after completion of the tender offer will
receive cash for their shares in the cash for stock swap process, which
will be conducted under the LSMIR, and Chinon will, at the close of this
process, no longer be listed on the Tokyo Stock Exchange.

Through this tender offer and subsequent cash for stock swap under the
LSMIR, it is the intention of Kodak to merge its subsidiary's Digital
Camera Research and Development center in Yokohama, Japan, with Chinon
to form a unified Kodak Digital Product Development Center.

"Our highly successful collaboration with Chinon began nearly 10
years ago and has evolved over time in response to the growing market
for digital products," said Yusuke Kojima, General Manager, Worldwide
Digital Camera and System Development, Digital & Film Imaging Systems,
and Vice President, Eastman Kodak Company. "Today's announcement
is a result of the natural evolution of the relationship between the two
companies and the changing conditions in both the Japanese and global
digital imaging markets."

"The successful completion of this tender offer and cash for stock
swap process will allow Chinon and Kodak to further enhance their position
in the Japanese market, while simultaneously strengthening their position
worldwide," he added.

Susumu Cho, president of Chinon, and the Chinon board of directors expressed
their support for the tender offer by noting that Chinon would be able
to enhance its well-developed capabilities in research and development,
engineering, operations, and manufacturing.

"As a result of the full acquisition, both Chinon and Kodak will
be in stronger and more competitive positions, with an increased ability
to bring innovative products to customers in Japan and around the world,"
Cho said.